Federal Tax Credit for Education Scholarship
ISLA - Islamic Schools League of America

Federal Tax Credit for Education Scholarship Program: What Islamic School Leaders and Parents Need to Know

Federal Tax Credit for Education Scholarship Program: What Islamic School Leaders and Parents Need to Know

Home Federal Tax Credit for Education Scholarship Program: What Islamic School Leaders and Parents Need to Know
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Federal Tax Credit for Education Scholarship Program

What Islamic School Leaders and Parents Need to Know

A new federal tax credit for education scholarships was recently passed through the budget reconciliation bill, and it has major implications for Islamic schools. The program is permanently enshrined into law and set to begin on January 1, 2027.

Here’s what Islamic school leaders and parents need to know:

  • This is a federal tax credit program for donors, NOT a school voucher program
  • Tax payers can donate to a non-profit Scholarship Granting Organization (SGO)
    • The  federal tax credit is capped at $1700 for donors
  • One of the eligible uses of the donated money is to provide scholarship funds to eligible students for private school tuition
    • Eligible student = from a household that is below 300% of the average median income
    • Donor doesn’t get to decide who the scholarship goes to but may be able to earmark which school can benefit from it (pending SGO’s specific rules)

What Needs to Happen Next

In order for this program to be successful, there’s a lot more work that needs to happen. This includes work on the federal and state level. For example, the Treasury will need to create the regulations around this, which will answer a lot of questions we have about the specific ways that this program will operate. In summary, what we do know about the work needed to happen next includes:

  1. States will need to opt-in to offer the education scholarships
  2. SGOs will need to be established or meet compliance regulations in each state that opts-in
  3. Schools will need to enroll to be eligible to receive the scholarships
  4. Donors will need to donate to fund the scholarships.
  5. Students/Families will need to apply and provide proof of eligibility.

While tax credits are capped at $1,700 for each donor, the scholarship amount does not have a cap. In other words, the SGO can provide a scholarship to cover one student’s full tuition by pooling several donations; or a donor can donate an amount that exceeds the tax credit cap.

Download the One Pager

While there is a lot that we do not yet know about how this program will ultimately function,  this one – pager provided to us by CAPE does a great job of clearly communicating what is currently known. You can feel free to read through it or download it for future reference.
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Another easy read on the implications of the Federal Tax Credit for Education can be found here.

Keeping You Updated

Dr. Shaza Khan, ISLA’s Executive Director, will be attending the upcoming Council for American Private Education bi-annual board meeting, as well as the Office of Non-Public Education meeting in Washington, DC, in September (inshallah!). We will keep you updated and informed on any new updates. In addition, administrators of member schools will receive monthly updates via our monthly Admin Meetings. Stay connected with ISLA to remain in the know. Sign up for our email listserv here.